Wharton professor Jeremy Siegel says he's disappointed in the Fed's hypocrisy on inflation, and that Jerome Powell will be cutting interest rates next year

The Federal Reserve telegraphed continued hawkishness at its December meeting on Wednesday, as Jeremy Siegel pointed out.

When inflation rose due to supply-side issues, Fed chairman Powell insisted that inflation was not a problem and did not raise interest rates.

Powell is doing the opposite when it comes to structural supply side issues that are hurting the labor market.

There are supply-side problems in the labor market and we have to crush the wages in order to stop inflation. Siegel told CNBC that it was completely inconsistent as a part of monetary policy. Structural shifts are not supposed to be done by the Fed.

Powell telegraphed a 50-basis point interest rate hike at the meeting.

Powell's justifications for the policy were very disappointing to me. We're not going to see housing prices go down until the middle of next year, even though the housing data is lagging. We are going to wait until the middle of next year before deciding if we need to stop the rate hikes. "I said so," Siegel said.

We need to stop looking at inflation over the course of a year. When we get year over year, we're getting 11 months of old, outdated data, and only 1 month of new data, and Powell admits that the housing sector is lagging.

Siegel pointed out that in the Fed's meeting last year only two members thought the Fed funds rate should be above 1% by the end of the year. The Fed fund's rate is high today.

They're going to be wrong. The funds rate had to go up a lot because they were too loose. Siegel said that they are too tight.

Siegel expects the Fed to cut rates by the middle of the next decade.

There is a possibility of a 25 basis point hike on February 1st. I don't think that's a good idea. Maybe that is the final one. Siegel said that next year they will talk about lowering rates.

The first rate cut might be closer to mid-year as the labor market loosens up and inflation goes down. We could see a 2-handle on the Fed funds rate by December. Siegel thinks that we may be seeing a surprise on the downside.